Unlocking Hidden Gems in the AI Revolution
The stock market has reached new heights, but savvy investors can still uncover reasonably priced growth stocks poised for outstanding returns. Artificial intelligence (AI) is a promising market to explore for long-term winners. Two companies, Dell Technologies and C3.ai, are experiencing growing demand for their AI products, yet their share prices are currently trading at discounts to their 52-week high.
Dell Technologies: A Leader in AI Servers
Dell Technologies, a pioneer in the PC industry, is now a leading supplier of AI servers. With half of its revenue coming from PCs and related products, and the other half from infrastructure products, including servers, Dell is well-positioned to benefit from the growing demand for AI products. The company’s third-quarter revenue grew 10% year over year, driven primarily by demand for AI products. Servers and networking revenue jumped 58% over the year-ago quarter, expanding Dell’s addressable market.
CEO Michael Dell believes the AI opportunity is “very significant,” comparable to the emergence of the internet in the 1990s, which delivered phenomenal growth for Dell’s PC business. Statista forecasts the AI server market will surpass $200 billion by 2029, presenting a massive opportunity for Dell. As the company sees strong growth from servers and PC products, its stock price is likely to rise, making now an attractive time to consider buying shares. Analysts expect Dell’s earnings to grow at an annualized rate of 13% in the coming years, making the stock look undervalued with a forward price-to-earnings ratio of 14 and a dividend yield of 1.53%.
C3.ai: A Leading Vendor for Enterprise AI Applications
On the software side, C3.ai is a leading vendor for enterprise AI applications, driving accelerating revenue growth. After reaching a new high of $45.08, the shares could be a great buy on the dip, currently trading around $33.18. C3.ai’s AI products are helping organizations make faster and more informed decisions, reflected in recent earnings results. Revenue grew 29% year over year, driven by expanding agreements with U.S. government agencies and large companies. This marks the sixth consecutive quarter of accelerating growth.
While C3.ai is not yet profitable, its lower valuation compared to rival Palantir Technologies presents an opportunity for investors. C3.ai trades at a price-to-sales multiple of 12, significantly lower than Palantir’s 66 times trailing revenue. As C3.ai continues to grow revenue and achieves greater scale, margins should improve. The company’s dependency on Baker Hughes is a concern, but revenue excluding Baker Hughes grew 41% year over year in fiscal Q2, and the customer base is expanding.
Don’t Miss Out on These Growth Opportunities
Investors who missed out on buying successful stocks in the past may want to consider these timely buys. With accelerating growth and promising market opportunities, Dell Technologies and C3.ai are poised for outstanding returns. Now is the right time to buy before it’s too late.
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